The document discusses how self-deception is one of the biggest mistakes traders can make. Traders may string together some successful trades by not fully adhering to their rules, but this behavior is unsustainable and will eventually lead to losses. When this happens, traders often try to prove they can stick to their stops on subsequent trades, but do so in controlled circumstances that don't truly simulate real market conditions. This self-deception prevents traders from fully addressing the issues causing their losses. Recognizing and monitoring for signs of self-deception is an important step for traders to improve their performance.

2. Let’s face it, some people are just not
cut out for trading. They may not have
the skill-set or passion required to
make it as a trader.

3. However, it’s my view that although
the vast majority of traders fail to
achieve long-term success, most
people don’t fall into this category and
whilst there are certainly a number of
factors to why people struggle to make
it, possibly the biggest trading mistake
you can make is self-deception.

4. So let me give you an example of what
I mean and see if it rings true.

5. You’ve had a few decent days where
you’ve made some good money and
traded well in your own mind. You
think that you might just have turned a
corner. Then BAM!! –

6. you lose a load of money by failing to
take your stops. Again. You try your
hardest to figure out why this has
happened to you time after time. You
consider quitting.

7. You probably feel pretty terrible about
yourself. After a few days, the pain
subsides a little and you decide to
trade and prove to yourself that you
really can take your stops. You trade
okay. You make a little money and you
take your stops when they come. And
the cycle continues.

8. Most people aren’t dumb. They’d
probably find it very easy to see this
repetition in someone else’s trading.
But when it comes to themselves,
people seem to be able to repeat
these same mistakes over and over.

9. So what gives?!
Self-deception.
Of course this is entirely unintentional
and an easy trap to fall into.

10. Let me highlight the most obvious
piece in the puzzle. When the trader in
the scenario I’ve just described eases
back into trading, they are really trying
extremely hard to ensure that they
stick to their stops.

11. Plus, they want to feel good about
themselves after taking an emotional
battering. They make every effort to
ensure they do what they already
know they need to do in order to
control risk. BUT, they do this under
highly controlled circumstances.

12. Of course you can’t control the
market. But the trader will focus on
their risk and avoid threats in the
market. By doing this, they never let
themselves get into a situation where
they are under severe duress.

13. They are not practicing the very
situation that has caused them to
spiral out of control and lose a load of
money.

14. But there’s a more subtle piece of
deception in the build up to
meltdown. When this trader is
stringing together a few good days,
almost invariably they are not strictly
adhering to their rules.

15. Sure, they’re making money, but
they’re also getting away with poor
trading. This is the kind of thing that
only lasts so long before it comes back
to bite you in the ass.

16. The critical thing here is that most
people recognize that this is
happening but they sweep it aside as
they are feeling good about their
trading. So begins the self-deception.

17. The subsequent self-deception
behavior of the trader where they go
into a risk-centric trading mode is a big
problem. The irony of it is though, if
it’s done for the right reasons, I think
most will understand that trading in
this way can be a positive exercise.

18. But it must be a core belief and a
modus operandi, not a method to
massage a bruised ego. If you can
focus on risk first when trading, half
the battle is won.

19. Complacency is something we must
recognize no matter who we are and
what our experience level is. Part of
experience is knowing when things
don’t feel quite right.

20. These warning bells can go off at any
time and it is our job as traders, to
ensure we never ignore them. It takes
some practice to heed these warnings
and to act on only those that are a
genuine threat.

21. Simply heeding warning signals is not
enough to lift the veil of self-
deception. You need to actively
monitor for these signals too. This
means constantly measuring errors,
mistakes and rash behavior in spite of
P/L figures.

22. You might think that if something
doesn’t cost you money in one
instance, then it can’t be a problem.
But if you aren’t trying to assess these
issues, you might be sitting on a ticking
time-bomb.

23. I’m not suggesting for one minute that you
start trading bigger or under more volatile
circumstances in order to learn. This
wouldn’t be very sensible at all and would
be likely generate over-sized losses. But
you do need to simulate these
circumstances somehow and honestly this
is no easy task.

24. But one thing that might be useful is to
practice your strategy on a simulator
either using a much faster moving
product (e.g. crude oil) or

25. when you are much more likely to get
extreme volatility (e.g. over NFP
releases) – with the express intent of
trying to make pretend cash whilst also
religiously sticking to your stops.

26. Ultimately, fixing any particular trading
issue usually isn’t particularly easy and
it becomes far more difficult when you
are constantly pulling the wool over
your own eyes. Recognition of self-
deception is the first step on the road
to taking control of a situation.